What the Fiat/Chrysler merger means for drivers

Why analysts say the deal will be a boon for consumers

Consumers could see more and better car models, as well as new perks, now that Fiat
IT:FXE:FIAT
has taken full ownership of Chrysler, experts say.

On Wednesday, Fiat bought out the 41.5% stake that the United Auto Workers still had in Chrysler. The agreement totaled $4.35 billion and means that Fiat and Chrysler can be merged into a single company. “While Fiat and Chrysler have already been operating as one company in many ways, including the structure of the executive committee and most product development and manufacturing decisions, this seals the status, and enables the two to integrate more fully and completely—including enabling Fiat access to Chrysler Group cash,” says Stephanie Brinley, an analyst at research firm IHS Automotive.

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“It is likely that overall consumers will benefit from Fiat’s acquisition of Chrysler,” says James Crompon, an analyst with research firm IBISWorld. MarketWatch asked analysts and experts to speculate what specifically drivers might gain in the future.

U.S. consumers will likely see more models hit the market and at a faster pace than in the past, thanks in part to efficiencies in the product development process created by the merger, says Edmunds.com senior editor Bill Visnic. “With more certainty in terms of finances and corporate structure, product planning can be a bit more streamlined,” says Chris Hopson, an analyst with IHS Automotive.

Luxury consumers may be the most changes: “The highlight for the U.S. consumer will be the roll out of Fiat’s luxury brands into the U.S.,” says Sarwant Singh, a senior partner and leader of the automotive and transportation team at research firm Frost & Sullivan, who predicts that models of luxury lines like Alfa Romeo and Maserati will be increasingly marketed to U.S. consumers. Indeed, Fiat has already been planning this to some degree: The auto maker plans to relaunch the Alfa Romeo in the U.S. in spring 2014 (the car hasn’t been sold in this country since 1995) and already has Maserati dealerships in this country, but Singh thinks this merger could mean even more exposure to Fiat’s luxury lines thereby increasing competition with the Lincolns and Cadillacs, giving consumers more choice.

U.S. consumers can also expect more lighter and fuel-efficient vehicles, hybrids and electric cars from the auto maker, says Visnic. “It’s an area Chrysler has been lacking in,” Singh says—but now they may choose to expand it to become more competitive with brands like Ford and GM. Singh also thinks that the company will put more resources into developing trucks and cars that run on natural gas. What’s more, he expects the auto maker to spend more on telematics and connectivity, which means that U.S. car consumers will likely get cars with better in-car entertainment or even Chrysler batched driverless cars sooner than they might have otherwise.

Some analysts say that this move could even impact consumers pocketbooks. “By sharing technologies, processes, platforms and components, the combined company will likely be able to reduce costs and pass these savings on to consumers,” says Crompton. He adds that synergies between the Fiat and Chrysler distribution and production networks “are expected to help the consolidated company reduce production costs, which in turn can be passed on to consumers” though he cautions that “higher margins, however, may also be used to pay down Fiat’s high levels of debt.”

Fiat to get full control of Chrysler

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Fiat agreed to pay $4.35 billion to buy the rest of Chrysler, Colorado begins legal retail sales of marijuana, why 2014 may be a very good year for actor Matthew McConaughy, and more. Photo: Getty Images.

Global consumers will likely get more exposure to the Chrysler brand due to this merger, experts say. Visnic says that he thinks the merger could accelerate the expansion of the Jeep brand in Europe. “They’ve been anxious to do this for a while and this could move it along,” he says. Asia too: “Chrysler has been mainly an American brand, but if you look at the demand in Asia, it’s very much growing towards crossovers and SUVs.” He says that this merger could give Chrysler crossover SUVs a better leg up in Asian markets.

To be sure, these kinds of changes at this point are mostly speculation and a merger like this can come with some hiccups. “Integrations don’t mean that things immediately happen as there are still a lot of barriers like language and culture, says Visnic. And changes may not come soon: “Because Fiat and Chrysler’s executive committee and management structures had been integrated already, dramatic changes in the structure or in the near- and mid-term product plans are not likely immediately,” says Brinley. And, of course, the merger many not do much good for either player: “Combining two weak companies may not result in one strong company, even with the opportunities for better efficiencies of scale, plant utilization, and purchasing power,” says Brinley.

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